Correlation Between Indian Overseas and HCL Technologies

Can any of the company-specific risk be diversified away by investing in both Indian Overseas and HCL Technologies at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Indian Overseas and HCL Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Indian Overseas Bank and HCL Technologies Limited, you can compare the effects of market volatilities on Indian Overseas and HCL Technologies and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Indian Overseas with a short position of HCL Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Indian Overseas and HCL Technologies.

Diversification Opportunities for Indian Overseas and HCL Technologies

-0.2

Correlation Coefficient

Indian Overseas  HCL Technologies

Good diversification

The 3 months correlation between Indian and HCL is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Indian Overseas Bank and HCL Technologies Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HCL Technologies and Indian Overseas is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Indian Overseas Bank are associated (or correlated) with HCL Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HCL Technologies has no effect on the direction of Indian Overseas i.e., Indian Overseas and HCL Technologies go up and down completely randomly.

Pair Corralation between Indian Overseas and HCL Technologies

Assuming the 90 days trading horizon Indian Overseas Bank is expected to under-perform the HCL Technologies. In addition to that, Indian Overseas is 1.67 times more volatile than HCL Technologies Limited. It trades about -0.07 of its total potential returns per unit of risk. HCL Technologies Limited is currently generating about 0.15 per unit of volatility. If you would invest  158,795  in HCL Technologies Limited on September 21, 2024 and sell it today you would earn a total of  34,630  from holding HCL Technologies Limited or generate 21.81% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.05%
Values	Daily Returns

Indian Overseas Bank  vs.  HCL Technologies Limited

Indian Overseas Bank

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Indian Overseas Bank has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

HCL Technologies

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in HCL Technologies Limited are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain technical and fundamental indicators, HCL Technologies may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Indian Overseas and HCL Technologies

The main advantage of trading using opposite Indian Overseas and HCL Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Indian Overseas position performs unexpectedly, HCL Technologies can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in HCL Technologies will offset losses from the drop in HCL Technologies' long position.

The idea behind Indian Overseas Bank and HCL Technologies Limited pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.